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Ignore Offers Of Mediation At Your Peril

ADR (‘Alternative Dispute Resolution’) is a collective term for processes designed to help resolve disputes without litigation. Mediation is one of the most well known forms of ADR.  In the recent case of ‘PGF v OMFS’ the Court of Appeal has given its strongest support for ADR since the leading case of ‘Halsey v Milton Keynes General NHS Trust’, a case decided in 2004.

In ‘Halsey’, the Court of Appeal held that although referrals to ADR should be voluntary, the court should encourage referrals robustly and a party refusing to participate in ADR without good reason could be subject to costs penalties.  A party to proceedings who has rejected an offer to mediate but then wins his case at trial might find that he is unable to recover from the losing party his costs incurred following the offer to mediate, if the court considers that his refusal to mediate was unreasonable.  In an extreme case the court might go a step further and order the winning party to pay costs incurred by the losing party following the offer to mediate.  

The case of ‘PGF’ offers a recent example of the principles established by ‘Halsey’ in action.  It involved a breach of repair claim relating to an office block.  The claimant made offers to settle and at an early stage invited the defendant to mediate.  The defendant simply ignored the invitation and eventually made an offer to settle of its own.  The claimant sent a further invitation to mediate which was also ignored.  Ultimately the claimant accepted the defendant’s offer.  The usual cost consequences of accepting would have been for the claimant to be responsible for the defendant’s costs for the relevant period, but the claimant argued that this should not apply because the defendant had failed to respond at all to invitations to mediate earlier in the process.   

The Court of Appeal referred to the ADR Handbook and endorsed the view that silence in the face of an invitation to engage with ADR is unreasonable.  Accordingly it ordered that the defendant should not therefore be entitled to recover its costs for the relevant period from the claimant. 

Clearly therefore parties to a dispute who ignore or refuse invitations to engage in ADR do so at their peril.  If mediation is to be refused, or its consideration is to be deferred until a later stage, the refusing party must take care to ensure that it gives the other party cogent reasons for the refusal or deferral as soon as possible, in response to the invitation.

Ross Burkitt | Solicitor

Litigation Department, Kerseys

31 January 2014